PMC-SIERRA, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is between PMC-Sierra, Inc. (the "Company"), and Xxxx X. Xxxxxxxx
("Executive") and effective as of September 27, 1999. 1. Termination Without
Cause or Constructive Termination, With Change in Control. If Company terminates
Executive's employment without Cause, or takes actions which constitute
Constructive Termination, and a Change in Control (or the signing of a binding
agreement which could result in a Change in Control) is reasonably expected
within the next 60 days or has occurred in the past two years, then the
following will occur. (i) Promptly following such actual or Constructive
Termination, Executive shall receive
(A) his Base Salary through the date of termination,
(B) a lump-sum payment equal to 4% of his then-current Base Salary for each
full month during which he was Employed by the Company or its affiliates,
provided that this total payment shall not exceed two times Executive's
then-current Base Salary,
(C) a lump-sum payment equal to 2% of his prior year's bonus for each full
month during which he was Employed by the Company or its affiliates (up to a
maximum payment equal to his four previous quarterly bonus payments added
together) and
(D) all accrued vacation, expense reimbursements and any other benefits due to
Executive through the date of termination in accordance with established Company
plans and policies. (ii) If within 10 days after the date of termination
Executive signs and delivers to Company a consulting agreement in substantially
Company's standard form used on the date of this Agreement which requires
Executive to (1) provide up to five days of consulting services to Company
during each calendar quarter at times reasonably acceptable to Executive, and
(2) maintain the confidentiality of Company's trade secrets and not use
Company's trade secrets other than for Company's benefit, then each option which
Executive holds at the date of termination will continue to vest and be
exercisable until 30 days after the option has fully vested. (iii) Until the
later of (1) two years after the date Executive's employment by the Company
terminates or (2) the date on which all options to purchase Company stock held
by Executive are fully vested, Executive will not directly or indirectly engage
in, provide services to or own a more than 25% voting interest in a business
anywhere in the world which develops, manufactures, markets or sells any
products which directly compete with the products manufactured, marketed or sold
by the Company or its subsidiaries at the date Executive's employment
terminates. (iv) Until the later of (1) two years after the date Executive's
employment by the Company terminates or (2) the date on which all options to
purchase Company stock held by Executive are fully vested, Executive will not
directly or indirectly attempt to influence any employee of the Company or its
subsidiaries to terminate the individual's services to the Company or its
subsidiaries, or hire any such employee. However, Executive may hire an
individual if more than six months have elapsed since the individual terminated
his or her services to the Company or its subsidiaries, and during the three
months before and the six months after the individual terminates his or her
services Executive did not communicate with the individual about employment by
another entity with which Executive has any relationship. (v) Executive's
agreements in Sections 1(iii) and 1(iv) are severable, and each will still be
enforceable even if another is not enforceable. If a court determines that any
provision of this section exceeds the maximum scope, time period or geographic
area that the court deems enforceable, the scope, time period or geographic area
shall be deemed the maximum that the court considers reasonable. 2. Automatic
Benefits After Change in Control. If on the first anniversary of a Change in
Control Executive is employed by Company or its successor, then Executive will
receive the payments and benefits under Sections 1(i)(A), 1(i)(D) and 1(ii) as
if Executive had been terminated without Cause on such date, whether or not
Executive's employment continues after such date. This provision shall become
effective automatically six months after the effective date of this Agreement.
3. Exclusive Remedy. This Agreement specifies all of Executive's compensation
and benefits resulting from actual or Constructive termination in connection
with a Change in Control. Executive shall not not be entitled to any other
compensation or benefits from the Company except to the extent provided under
any written Company benefit plan, stock option agreement or indemnification
agreement, or as may be required under applicable law. 4. Definitions. (i) "Base
Salary" means Executive's then-current cash compensation paid on the Company's
standard salary payment schedule, less applicable withholding. (ii) "Cause"
means (i) gross dereliction of duties which continues after at least two
notices, each 30 days apart, from the Chief Executive Officer (or in the case of
the Chief Executive Officer, from a director designated by a majority of the
board of directors), specifying in reasonable detail the tasks which must be
accomplished and a timeline for their accomplishment to avoid termination for
Cause, (ii) willful and gross misconduct which injures the Company, (iii)
willful and material violation of laws applicable to the Company, or (iv)
embezzlement or theft of Company property. (iii) "Change of Control" means the
occurrence of any of the following events:
(A) Any "person" or "group" as such terms are defined under Sections 13 and 14
of the Securities Exchange Act of 1934 ("Exchange Act") (other than the Company,
a subsidiary of the Company, or a Company employee benefit plan) is or becomes
the "beneficial owner" (as defined in Exchange Act Rule 13d-3), directly or
indirectly, of Company securities representing 50% or more of the combined
voting power of the Company's then outstanding securities.
(B) The closing of (a) the sale of all or substantially all of the assets of
the Company if the holders of Company securities representing all voting power
for the election of directors before the transaction hold less than a majority
of the total voting power for the election of directors of all entities which
acquire such assets, or (b) the merger of the Company with or into another
corporation if the holders of Company securities representing all voting power
for the election of directors before the transaction hold less than a majority
of the total voting power for the election of directors of the surviving entity.
(C) The issuance of securities which would give a person or group beneficial
ownership of Company securities representing 50% or more of all voting power for
the election of directors.
(D) A change in the board of directors such that the incumbent directors and
nominees of the incumbent directors are no longer a majority of the total number
of directors. (iv) "Constructive Termination" means (i) a material reduction in
Executive's Base Salary, target bonus or benefits, (ii) a material reduction in
title, authority, status, obligations or responsibilities, or (iii) the
requirement that Executive relocate more than 100 miles from the current Company
headquarters. 5. Golden Parachute Excise Tax. If the benefits provided for in
this Agreement or otherwise payable to Executive constitute "parachute payments"
within the meaning of Section 280G of the Code and will be subject to the excise
tax imposed by Section 4999 of the Code, then Executive's severance benefits
under Section 1 shall be (i) delivered in full, or (ii) delivered as to such
lesser extent which would result in no portion of such severance benefits being
subject to the Excise Tax, whichever of the foregoing amounts, taking into
account the applicable federal, state and local income taxes and the Excise Tax,
results in the receipt by Executive on an after-tax basis, of the greatest
amount of severance benefits. Unless the Company and Executive otherwise agree
in writing, any determination required under this Section 5 shall be made in
writing in good faith by the accounting firm serving as the Company's
independent public accountants immediately prior to the Change of Control (the
"Accountants"). For purposes of making the calculations required by this Section
5, the Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of Sections 280G and 4999 of the Code. The Company
and Executive shall furnish to the Accountants such information and documents as
the Accountants may reasonably request in order to make a determination under
this Section. The Company shall bear all costs the Accountants may reasonably
incur in connection with any calculations contemplated by this Section. 6.
Assignment. This Agreement shall bind and benefit (a) Executive's heirs,
executors and legal representatives upon Executive's death and (b) any successor
of the Company. Any such successor of the Company shall be deemed substituted
for the Company under the terms of this Agreement for all purposes. "Successor"
shall include any person, firm, corporation or other business entity which at
any time, whether by purchase, merger or otherwise, directly or indirectly
acquires all or substantially all of the assets or business of the Company.
Executive has no other right to assign this Agreement and any such attempted
assignment is void. 7. Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if (i) delivered personally, (ii) one day after being sent by Federal
Express or a similar commercial overnight service, or (iii) three days after
being mailed by registered or certified mail, return receipt requested, prepaid
and addressed to Company at its principal office, attention: Chief Executive
Officer, or to Executive at his last principal residence known to the Company,
or at such other addresses as the parties may designate by written notice. 8.
Severability. In the event that any provision hereof becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision. 9.
Entire Agreement. This Agreement and any proprietary information and invention
assignment, stock option, stock purchase or indemnification agreement represent
the entire agreement and understanding between the Company and Executive
concerning Executive's employment relationship with the Company 10. Arbitration
and Equitable Relief. (i) Any dispute or controversy arising out of, relating
to, or in connection with this Agreement, or the interpretation, validity,
construction, performance, breach, or termination thereof shall be settled by
arbitration to be held in Santa Clara, California in accordance with the
National Rules for the Resolution of Employment Disputes then in effect of the
American Arbitration Association (the "Rules"). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction. (ii) The arbitrator shall apply Delaware law to the merits
of any dispute or claim, without reference to rules of conflict of law. The
arbitration proceedings shall be governed by federal arbitration law and by the
Rules, without reference to state arbitration law. (iii) The Company shall pay
the costs and expenses of such arbitration. Each party shall separately pay its
counsel fees and expenses. (iv) Executive understands that nothing in this
Agreement modifies Executive's at-will status. Either the Company or Executive
can terminate the employment relationship at any time, with or without cause.
11. No Oral Modification, Cancellation or Discharge. This Agreement may only be
amended, canceled or discharged in writing signed by Executive and the Company.
12. Withholding. The Company shall be entitled to withhold, or cause to be
withheld, from payment any amount of withholding taxes required by law with
respect to payments made to Executive in connection with his employment
hereunder. 13. Governing Law. This Agreement shall be governed by the laws of
the State of Delaware (with the exception of its conflict of laws provisions).
14. Representations. Executive represents that he has had the opportunity to
discuss this matter with and obtain advice from his private attorney, has had
sufficient time to, and has carefully read and fully understands all the
provisions of this Agreement, and is knowingly and voluntarily entering into
this Agreement.
PMC-SIERRA, INC
/s/ Xxxxxx X. Xxxxxx
XXXXXX X. XXXXXX
PRESIDENT & CEO
/s/ Xxxx X. Xxxxxxxx
XXXX X. XXXXXXXX
(signature)
